Gold and silver extend rebound, but volatility concerns remain

Gold and silver prices extended their gains on Wednesday, and analysts said further gains were likely determined by the direction of currency and interest rate expectations.

Spot gold was up 2.4% at $5,054.6 an ounce as of 5:37 a.m. ET. gold futures It rose about 3.4% to $5.1. Meanwhile, spot silver rose 5.8% to $90 an ounce. Silver futures rose 8% to $90.16.

Precious metal prices rebounded strongly on Friday after gold fell nearly 10% and silver prices fell 30%, marking its worst one-day performance since 1980.

“Today’s rally in gold reflects another round of bullish buying after the steepest correction in precious metals in years, as broader markets stabilized and the US dollar weakened,” Ewa Mansey, commodity strategist at ING, told CNBC in an email.

of ICE US Dollar Index It was little changed on Wednesday at 97.382, but is down significantly from the January 19 high of 99.39.

London-listed mining companies also expanded their profits. Rio Tinto was trading 1% higher and Anglo American 0.7% higher, while Antofagasta was down about 0.2%. The FTSE 350 Precious Metals and Mining Total Return Index rose 2% to around 34,963.

UBS Chief Executive Sergio Ermotti said the bank’s clients have become more cautious lately.

“They’re looking for protection, and they’ve been shying away from the technology sector a little bit lately,” Ermotti said in an interview with CNBC.

“So I think it’s fair to say that excess cash is probably being reallocated to the capital markets. We’ve also seen it in precious metals over the past few months, but broadly speaking, clients are maintaining their asset allocations,” he added.

Analysts said further gains in the precious metal could slow further.

“Near-term volatility is likely to continue, but we view this move as a positioning-driven reset rather than a structural reversal,” ING’s Manthey said.

“In the coming weeks, the pace and sustainability of further gains will be determined by dollar movements, interest rate expectations and risk sentiment. Precious metals are likely to rise at a more stable pace rather than repeating the explosive gains of the past three months,” Manthey added.

Goldman Sachs has a gold price target of $5,400 by the end of 2026.

“Our forecast factors in two factors: central banks maintaining their recent pace of accumulation, and private investors increasing their purchases of gold ETFs as the Fed lowers interest rates,” Goldman analysts Lina Thomas and Daan Struiben said in a research note.

Meanwhile, BofA Securities has an even more bullish price target for gold at $6,000 in the coming months.

“Cash market fundamentals remain supportive, although somewhat volatile. That said, we are somewhat concerned about the speed of recent price increases and the associated increased volatility,” BofA’s global commodities research team said in a note.

Clouding their forecasts are political uncertainty ahead of this year’s midterm elections in November and the direction of U.S. interest rates under Kevin Warsh, President Donald Trump’s pick to lead the Federal Reserve.

“Although the ultimate impact of the Warsh Fed on precious metals is not yet completely clear, this adjustment may have been driven not necessarily by views on interest rate trends, but by optimism that the Fed will eventually become less reliant on data and more proactive and realistic, although Warsh appears to be moving toward further easing,” BofA said.